Monday, March 31, 2014

Should we put our faith in development experts or democracy?

The Tyranny of Experts, by William Easterly, is an important book which deserves to be read by anyone with an interest in economic development.  

Easterly argues persuasively that in viewing economic development as a technical problem requiring expert solutions, development economists have strengthened the hands of autocrats and deprived the poor of their rights.  His examination of economic growth experience suggests that leaders matter very little for either good or ill – the influence of leadership is overshadowed by other factors such booms and busts in commodity prices. 

He concludes:
“This is not good news for the experts. If leaders do not drive growth, then the experts advising them do not drive growth either. The experts had promised to deliver high growth in return for giving them and their autocratic pupils more power. There is no evidence that they have delivered. The growth-payoff justification for the Tyranny of Experts has turned out to be spurious”(p326).

In my view, Bill Easterly’s attack on strong political leaders (and their expert advisers) involves too much collateral damage. My reading of history (as well as my own experience in the economic advice industry) suggests to me that strong political leadership is not always at variance with “spontaneous solutions arising from political and economic rights”. Some strong political leaders have been able to use democratic processes to overcome interest groups which have been using their political muscle to restrict freedom. Surely the relevant choice is between freedom and its alternatives. I will return to this point later.

Bill Easterly argues that proponents of the technocratic approach to economic development have failed to establish that it delivers greater development in exchange for sacrifices in individual freedom. He does not argue that such aid always requires sacrifices in freedom. The technocrats who claim rigorous evidence in favour of some forms of development aid (e.g. treated mosquito nets and deworming drugs) can reasonably claim that such assistance expands opportunities available to individuals without in any way restricting their freedom.

Easterly’s point is that by viewing development as a purely technical problem, the technocrats systemically overlook the human rights abuses of the autocrats they help to keep in power. He cites the example of Meles Zenawi, an Ethiopian autocrat who has been praised by Bill Gates and Tony Blair for reductions in child mortality that may not actually have happened. Zenawi used aid funds to blackmail starving peasants into supporting his regime and he forcefully relocated farmers in the Gambella region to model villages so that he could sell their land to foreign investors.

In some other instances there is a more direct link between aid and the abuse of individual rights. For example, the book begins with the story of a World Bank funded forestry project in the Mubende district of Uganda. This aid project involved the forced evacuation of local farmers to enable a British forestry company to take over their land.

Bill Easterly presents evidence that poor people value freedom as an end in itself, but his defence of freedom is not based entirely on those grounds. He argues that freedom promotes individualistic values that favour economic development. By contrast, autocrats promote the interests of the kingdom (or state) above those of the individual and foster collectivist values that are inimical to economic development. That view is consistent with the recent history of rapid economic growth in countries such as China, as well as with the longer history of economic growth in high income countries. Easterly points out that the rapid economic growth in China can be related to the major change toward greater freedom that occurred in China after 1978.

This might be an appropriate point to return to a discussion of the merits of strong leadership. Autocrats sometimes promote freedom. Mancur Olson’s distinction between the incentives faced by roving and stationary bandits (discussed here a few years ago) comes to mind at this point. However, I am more concerned to defend the strong leadership of democrats like Margaret Thatcher than that of autocrats like Deng Xiaoping.

Bill Easterly recognizes that voting is not a sufficient condition for individual rights, but in my view he does not pay sufficient attention to the current problems of democracies, which were discussed here last week. Some democracies have had relatively good records of defending individual rights and ensuring widespread opportunities for individuals to flourish. In recent years, however, weak leadership in quite a few democracies has permitted an explosive growth of public debt which has ended up subjecting citizens to the “tyranny” of experts in the IMF and ECB. 

Democratic political institutions are not always good enough to ensure that political rights produce spontaneous solutions to economic policy problems.

Tuesday, March 25, 2014

"What's gone wrong with democracy?"

That was the title of an essay published in The Economist a few weeks ago.

For the most part I think the essay is quite good. That judgement wouldn’t surprise anyone who has read my book, Free to Flourish because the main points in the essay are similar to those in Chapter 8 of my book. The biggest challenge to democracy comes from the tendency of governments to overreach – by creating entitlements that they cannot pay for, or by waging “wars” that they cannot win “such as that on drugs”. The solution lies in finding ways to ensure governments and electors accept appropriate restraint.

However, the essay has got me thinking that there is something odd about the argument that democracy is such a good thing that it needs to be restrained in order to be preserved. I suppose what we might be saying is that democracy is, in some respects, like wine - it is good, but you can have too much of it. If that is what we are saying then we should probably admit that we view democracy as a means to achieve more fundamental objectives, rather than as an end in itself. If we think it is possible to have too much democracy we must be saying that too much democracy would conflict with some fundamental objective that is important to us.

The introduction of The Economist’s essay suggests reasons why people prefer “rules-based democracy” to “corrupt, abusive and autocratic governments”. But, why do we need reasons? If a “rules-based democracy” enables us to avoid or remove corrupt and abusive government, that would have to be better than living under corrupt and abusive government. The end we want to achieve is to enable corrupt and abusive governments to be replaced peacefully. Democracy provides a means to that end. The fact that the democratic systems used in southern Europe don’t seem to have been capable of replacing corrupt governments with non-corrupt governments might suggest to us that those systems of government are deeply flawed.

The reasons given in the essay as to why people prefer democracy are as follows:
“Democracies are on average richer than non-democracies, are less likely to go to war and have a better record of fighting corruption. More fundamentally, democracy lets people speak their minds and shape their own and their children’s futures”. 

Perhaps those are reasons why many people say they prefer democracy, but it is far from clear that democracy causes all those things to happen. The assertion that “democracy lets people speak their minds and shape their own and their children’s futures” seems to me to be more a statement of what should happen rather than what actually happens.

Democracy requires that candidates for election have sufficient freedom in presenting their views to enable electors to choose between them. That doesn’t necessarily mean that democracy “lets people speak their minds”. For example, just last year, the former Australian government was proposing to introduce laws that would make it illegal to, among other things, “offend or insult” people on the basis of their “political opinions”. People elected to power via democratic processes do not always support free speech.

Similarly, the idea that democracy lets people “shape their own and their children’s futures” seems to me to be more a statement of what should happen, than a statement of what actually happens. Governments have become far more involved in shaping the lives of people since the advent of democracy. The governments that are attempting to shape the lives of people through their wars on drugs, alcohol, tobacco, gambling and, more recently, fat and sugar, are democratic governments.

When we ask ourselves what has gone wrong with democracy, we tend to begin by convincing ourselves that democracy is good for us because all other systems would be worse. We then proceed to worry that the self-destructive tendencies of democracy are becoming more evident and to consider how democracy can be constrained in order to be preserved. The message is important, but is complicated.

We might have more hope of moving toward a better system of democratic government if we were to adopt a more straight forward approach. What I have in mind is that we should approach the issues by considering the characteristics of good government and how our existing systems of government would need to be modified to have those characteristics to a greater extent.

At this point I might be well advised to elaborate what I mean by good government and then spend the next few years researching what others have written about the characteristics of good systems of government. But the essential characteristics of a good system of government seem fairly obvious. It would:
  • defend the lives and property of individuals and their right to live as they please, provided they do not interfere with the similar rights of others;
  • ensure widespread opportunities for individuals to flourish by using their personal resources for purposes they value in mutually beneficial endeavours with others; and
  •  provide a mechanism for peaceful removal and replacement of governments that do not defend individual rights and ensure widespread opportunities for individual human flourishing.

So, how can we move further toward a system of government that has those characteristics?